On 17 August 2023, New York-based private jet on-demand provider Wheels Up has been saved from bankruptcy via a $500 million investment. The deal is backed by critical support from Delta Air Lines, which maintained a 20% stake in the company prior to the deal's announcement. Delta, in addition to two investment firms, Certares Management LLC and Knighthead Capital Management LLC, has provided a $400 million term loan from a CK Opportunities Fund, which is managed by both groups.

Delta's role in the investment deal also involves the provision of a liquidity facility totaling over $100 million in value. An additional $50 million in capital has also been provided by investors approved by Delta and the two financial management organizations. In return for the support, Wheels Up will provide 95% of the company to its creditors upon the transaction's completion.

Photo: Wheels Up

The company, which was founded in 2013 by Kenny Dichter, provides on-demand private jet service by using a membership model. The company maintained revenues of nearly $1.2 billion in 2021 and has total assets nearing $2 billion in value.

The airline has grown since its founding through multiple acquisitions, including the purchase of Delta Private Jets, Gama Aviation Signature, and Mountain Aviation. As of August 2023, the company was the second largest on-demand provider of private aviation after NetJets. The company currently operates a fleet of King Air 350i turboprops, Cessna Citation Excel jets, and Citation X aircraft.

Transaction specifics

On 15 August, the company issued a stock market warning, indicating its likely inability to continue operations without secured funding in the short term. Furthermore, the company also disclosed in a filing to the Securities and Exchange Commission (SEC) that it was in discussions surrounding strategic partnerships and that Delta had identified its interest in providing capital. Wheels Up had also indicated that it was communicating with Bain Capital regarding other ways to avoid a bankruptcy filing.

Photo: Wheels Up

Now, with a Delta-led takeover looming, the Atlanta-based airline's Chief Financial Officer Dan Janki will join Wheels Up's board's chairman, while current executive chairman Ravi Thakran will revert to director status. In a statement regarding the takeover, Delta's Chief Executive Officer Ed Bastian said the following:

"The partnership will create new opportunities for Wheels Up to drive strategic, operational, and financial improvements for its customers in the months and years ahead. Delta's unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares' and Knighthead's experience and global reach, are expected to speed Wheels Up on its path to profitability."

Photo: Wheels Up

Wheels Up's leadership team is certainly excited by the incoming financial support. In a statement responding to the investment deal's announcement, Interim Chief Executive Officer Todd Smith had the following words to share:

"Over the past few months, we have been intensely focused on taking clear steps to improve our product offering and our operational delivery. Those actions are already showing results, and we look forward to continuing and accelerating that progress with the support of our new partners. Our continued close work with the Delta team will enable us to further integrate our digital experiences, member benefits and our operations."

With newfound financial stability, Wheels Up will look to begin moving back toward profitable status. However, the company's leadership will need to identify what caused the company to face financial difficulties in the first place and avoid heading in the same direction again.

Source: Ch-Aviation